00:00To the layperson, this is pretty complicated stuff, but you take a look at a chart of your
00:05total assets. This ETF has really grown steadily since you launched it in September 2023 or so.
00:12So how do you explain this? You know, how do you socialize this idea and really make some of the
00:18people that you're trying to pitch to understand this concept when, you know, you think about
00:23the S&P 500? It's a pretty easy sell. Thank you for having me, guys. And as you said,
00:29this is a strategy that we do have to educate people about. But when we look at what we're
00:35doing, it's really, as Eric mentioned, nothing novel. This idea of portable alpha has been around
00:39in the institutional space going back to the 1980s. And really what's happening in the world of ETFs is
00:45we can bring it downstream, package this idea up in an ETF and make it available to the wealth
00:50and retail channel. So that's really exciting for us. We call it return stacking rather than portable
00:55alpha because we hope it makes clear what we're trying to do. We're trying to stack the returns
01:01of a managed future strategy on top of the S&P 500. And that's really critical for a lot of
01:07investors because so many investors are comfortable with the S&P 500. They don't want to give up those
01:12returns. So the idea of adding a strategy like managed futures, no matter how good the historical
01:18returns look from a total return perspective or a diversification perspective, can be really hard to
01:23stick with when you have this rampant bull market. By return stacking, we can try to sort of have our
01:29cake and eat it too. We can keep that equity beta and then add that diversifying return stream on top,
01:35keep it along for the ride. So hopefully that it's there in the portfolios for years like 2008 or 2022
01:41when you need it most. Yeah, no, this is really interesting because advisors have traditionally not
01:47bought any alts in the ETF wrapper. This is a way to get them without having to give up their
01:52S&P.
01:53My question on the managed futures part of it, we know what the S&P does. How does that work?
01:58How
01:58much are you short versus long? How much beta do you have in there? Is it more like a completely
02:05true
02:05hedge fund or is there a little more beta filler than maybe something that an institution might use?
02:11Yeah, so managed futures is a hedge fund strategy that goes back to the 1970s, predominantly uses trend
02:18following, right? So it's going to look at things that are going up and try to take long exposure to
02:22take
02:22advantage of persistent trends. And similarly, things that are going down, it's going to try to short.
02:26And it's going to trade futures markets globally in things like equities, bonds, currencies, and commodities.
02:32So you get a nice diversified amount of exposure that's very dynamic over time. So the question of do you
02:38have
02:38beta in there? Well, the answer is when equity markets are going up, you can add some extra equity beta.
02:43When equity markets are going down, though, you can be short. Right now, if you look at the portfolio,
02:48a lot of our return is being driven by exposure to metals and commodities, complementing the equity beta
02:54in a very diversified way. But it is a very dynamic portfolio. It's very adaptive. And that's what's made it
03:00as the hedge fund strategy so resilient for so many decades.
03:03And Corey, as we mentioned, I mean, you've had a lot of success with accumulating AUM here when it comes
03:09to
03:09your suite of return stacking ETFs. When I take a look at your prediction for the category overall,
03:14you've penciled in 50 billion dollars by 2030. Talk to us about what gets us there over the next four
03:22years. How does this category grow to that sort of threshold?
03:26Yeah, look, I remember my first meeting with some of the people who brought defined outcome ETFs to
03:31market back in 2019, 2018. And a light bulb really went off for me there saying, OK, the ETF is
03:38now able
03:38to bring this other product structure to market in a way that advisors can allocate to it in their
03:45portfolio. I look at return stacking in the broader portable alpha ecosystem being the same.
03:50The ecosystem for what can be brought into an ETF wrapper has changed and evolved over time. We can
03:56now make these diversifying assets or strategies much more palatable by combining them with the beta.
04:04We've seen Morningstar recently introduce a whole new category for this style of product. They call
04:09it multi-asset overlay that had never existed before. There's probably between mutual funds and ETFs
04:14close to 10 billion in assets already. And I think what you're seeing as you look at the filings in
04:20the
04:20world of ETFs, more and more alternative managers are starting to bring product to market just like
04:25this. After we launched RSST, we've seen AQR bring mutual funds to market, Man Group bringing ETF to
04:31market. JP Morgan just launched a similar ETF. It's my view that this is the easiest way to get
04:37investors to add those diversifiers to their portfolio without having to sacrifice the core
04:42betas that they know and love. Yeah. So it's interesting looking at your lineup. I mean,
04:47I think stocks and a hedge fund strategy is the obvious one. You also have bonds and managed futures,
04:53and then you have like bonds and merger ARB. You've got even got U.S. stocks and then gold Bitcoin.
04:58Bitcoin. Where else can you take this? Like how many possibilities are there? And do you plan to
05:04launch more? Yeah. I mean, so we have launched eight ETFs over the last three years. We've pretty
05:10much brought a new ETF to market every five to six months, and I would expect us to continue. And
05:15it's a question of are we changing sort of the base? Are we changing the nature of the stocks or
05:20the bonds, which to date have been very passive? Are we adding new hedge fund strategies? Again,
05:25the reality is with some innovations that have occurred both in the market making ecosystem as
05:30well as in the regulatory environment with the new 18F4 rule, we have a tremendous amount of
05:36flexibility as to what we can bring to market. Now, whether it's prudent to bring everything to
05:41market is another question. We always want to make sure there's sufficient demand. But even when you
05:45talk about something as simple as just commodities, which when I entered the industry back in the 2000s,
05:50were very, very popular as a portfolio diversifier, but now show up almost nowhere. Well, it may be a
05:55lot easier for investors to add something like commodities on top of their portfolio if they
06:00simply stack it on top rather than have to sell stocks and bonds to make room. And so we're looking
06:05towards all sorts of hedge fund strategies and even just more passive diversifying asset classes to see
06:10what can be put into the ETF wrapper.
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